President Ilham Aliyev approves law "On Crowdfunding"

President of the Republic of Azerbaijan Ilham Aliyev has approved the law "On Crowdfunding".

The text of the law was published on the official website of the President of Azerbaijan.

Under the law, crowdfunding platform operators may only be established as limited liability companies or joint-stock companies. Their charter and aggregate capital must meet the minimum requirements set by the Central Bank of Azerbaijan, and operators must be entered into a special register maintained by the regulator before commencing operations.

The law also introduces rules governing significant shareholdings in crowdfunding platform operators. A stake of 10 percent or more is considered a significant shareholding and may only be acquired with the approval of the Central Bank. The regulator will have up to 60 calendar days to review applications to increase holdings to 20, 33 or 50 percent.

The legislation sets qualification requirements for senior management, including higher education and an appropriate professional reputation. At least one executive must have a minimum of three years' experience in financial services. Individuals who managed financial institutions declared bankrupt or liquidated for prudential violations will be barred from holding management positions in crowdfunding operators for three years.

To prevent conflicts of interest, operators may invest no more than 20 percent of a project's fundraising target through their own platforms. Employees and significant shareholders of an operator may not be direct owners of projects listed on the same platform.

The law also introduces a seven-day "cooling-off" period for retail investors. During this period, beginning the day after an investment offer is made, investors may withdraw their investment without providing a reason or incurring penalties.

Crowdfunding campaigns may run for a maximum of 90 days from the publication of the key information sheet. Under equity-based crowdfunding, only joint-stock companies may act as project owners, with a limit of two fundraising campaigns within a 12-month period.

Debt-based crowdfunding will be permitted only through bond issuance, with a maximum bond maturity of five years. Project owners using this model will also be limited to two crowdfunding campaigns over a 12-month period.

Following the successful completion of a campaign, operators must begin placing securities within three business days, with the placement process also limited to three business days.

The law will enter into force six months after its publication, allowing prospective operators time to comply with the new regulatory requirements.